Europe's biggest low cost airline Ryanair has reported a 39% increase in profits for the first half of 2001.

The airlines that have lower fares will win more and more business, while airlines such as BA, which follow a policy of increasing air fares are doomed to failure

Michael O'Leary, chief executive, Ryanair

The budget carrier also reported a 37% increase in passenger traffic to 5.3 million.

Michael O'Leary, Ryanair's chief executive, said: "This is a great set of results bearing in mind that the half year covers both the foot-and-mouth outbreak in the UK at the beginning and the tragic events of 11 September".

Half-year profits, after tax, were 63.5m euros.

In the City, Ryanair shares jumped more than 8% to stand at 681 in late morning trade.

Growth opportunities

Mr O'Leary has said the current depressed climate in air travel offered opportunities for Ryanair.

"Our average fares in the period fell by 6%," he told the BBC's World Business Report. "We are engaged in an ongoing process of reducing costs."

"The outlook for the next few months is that we are certainly going to carry more passengers than we previously predicted, we'll carry them at slightly lower fares than previously predicted...We are bang on track to record our 13th consecutive year of profits," he added.

Negotiations

Ryanair is currently in negotiations with 30 airports over landing rights, with some cities reportedly willing to pay the airline to fly there in order to boost tourism.

"Airport maintenance and handling contracts are presently being renegotiated and we expect to achieve efficiencies from these suppliers in return for delivering increased growth.

"In this negative environment in Europe, Ryanair is now being courted by many more airports, some of whom would never talk to us prior to 11 September," he added.

Mr O'Leary said that Germany's Lufthansa and Scandinavian Airlines System (SAS) had announced their intention to pull out of Stansted, one of Ryanair's biggest hubs in Britain.

He also reiterated his opposition to state aid for national airlines.

'Doomed to failure'

Mr O'Leary said Ryanair was less affected by 11 September than bigger carriers such as British Airways because it immediately launched savage price cuts, which he insisted could be maintained in the coming months.

"I see no reason why we shouldn't keep this up," he told BBC Breakfast.

"The airlines that have lower fares will win more and more business, while airlines such as BA, which follow a policy of increasing air fares are doomed to failure."

He said it had "never been easier" for Ryanair to expand into Europe, because the bigger players, especially BA, SAS and Alitalia, were abandoning routes.

Over the next 18 months middle-ranking airlines, such as Alitalia, Olympic and even KLM would be swallowed up by larger carriers, MR O'Leary predicted, leaving the "big three" (BA, Lufthansa and Air France) and a handful of budget carriers, of which Ryanair would be the leader.